Getting Your Car Loan Despite a "No Credit" Rating

No credit car loans are difficult to find through traditional lending sources such as banks. Having "no credit" simply means your credit history is not long enough in order to generate an appropriate credit score. This typically happens with young people and students. However, military personnel or married people may discover they have not been listed as the sole account holder on a loan or credit line, leading to a lack of credit history. In any of these scenarios, you will need to make extra efforts during the application process to find a good loan.

Opting for a Bank Loan

If you would like to stay with a traditional lender, like a bank, then you will need to overcome your lack of credit by securing the loan against an asset. Banks will not typically solely accept the car title in order to secure the loan if you do not have any credit. So, consider other assets you may use to secure the loan. If you have a savings account with a bank, you may use this in order to receive a line of credit. You may also use other assets, such as a stock certificate or another car you own, as collateral to secure the loan. The bank will not want to take the risk of extending a loan to you without any collateral for security, but they may offer a high loan to value ratio on your collateral if you provide both the title to the new car along with your personal asset.

Negotiating for a Dealer Loan

Dealers tend to have more incentive to extend you a risky loan; they want to sell you the car, and they want to profit on the financing. You may have better luck negotiating with a dealer. First, check to see if the dealer offers special discounts or loan options for people in your situation. Many dealers will have "student" or "military" options to extend. These often include a small discount on the sticker price in exchange for a higher monthly payment or longer loan contract. Dealer loans tend to have worse terms across the board, and you should be aware of this if you have no credit. However, without credit, you may not have the luxury of being selective with your loan terms.

Seeking Alternative Sources

There are many alternative loan sources for people with little to no credit history. These lenders will usually charge you more in interest rate in exchange for the "high risk" they are taking in extending you the loan. Again, you may not have the luxury of being choosy here. The advantage with an alternative, high risk loan, such as an online loan or independent loan, is you will build your credit very quickly when you pay it off. Higher risk loans have a greater impact on your credit score than secured or low risk loans. This means you will have many more options in the future if you succeed in securing and paying off a high risk car loan through an alternative source.


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